In the early 1980s in the United States, stock index options, stock index futures and stock options were scheduled to be delivered at the same time on the third Friday of each quarter, resulting in a significant increase in trading volume and price fluctuations, which was called "three switches" by the market. After the introduction of stock futures, four derivatives are delivered on the same day, which is called the "three witches effect". The following is a brief description of a case of "Three Witches Effect", and introduces two cash delivery schemes commonly used abroad to prevent the "Three Witches Effect".

The core of preventing the "three witches" effect is to prevent market manipulation to ensure the fairness of the market to small and medium investors. The case shows that 20 10 Deutsche Bank Korea Securities Company influences the settlement price of stock index options by manipulating KOSPI200 stock index components. The parties illegally made a profit of about RMB 250 million, and the stock index plunged more than 2.4% in the last ten minutes. The company made huge profits and the investors suffered heavy losses. In the options market with a large proportion of retail investors in Korea, the rights and interests of small and medium-sized investors were illegally infringed by large foreign-funded institutions, which caused great international influence, and Deutsche Bank was therefore banned from trading in the Korean stock market for half a year. However, the call auction method adopted by Korea Stock Exchange to determine the option delivery price at the last 10 minute was questioned by all parties afterwards.

On the premise of cash delivery, in the system design of stock index options, overseas exchanges usually take two ways to moderately prevent the "three evils" effect, one is to use the opening price for delivery and settlement, and the other is to use the arithmetic average price for delivery and settlement. Several American exchanges set the delivery time of stock index options as Friday opening, and used SOQ (special opening price) to settle options, in exchange for a small amount of potential overnight hedging risk to effectively avoid the "three witches" effect. On the other hand, the index option products of the stock exchanges in continental Europe, London, Hongkong and Taiwan Province mostly use arithmetic average as the settlement price, at the expense of converging the last option price. The calculation method of long-term arithmetic average will make the market almost out of control.

The maturity effect of the gathering of the three witches exists in most markets and will weaken with the development and maturity of the market. Strengthening the training and support for market makers and arbitrageurs can shorten this cycle. China's Shanghai and Shenzhen 300 stock index futures settlement uses the average price of the stock index in the last two hours. Since the listing of 20 10, the delivery has been very stable and the price has become increasingly rational, which is also due to the maturity of investors and the participation of arbitrageurs.